Fred Meyer standing its ground despite invasions of its territory - combination food/discount store chain - Discount Industry Annual Report: Part 2: Merchandising & Productivity

Discount Store News, July 17, 1989

Fred Meyer Standing its Ground Despite Invasions of its Territory

PORTLAND, Ore. -- After dominating the Pacific Northwest retail scene for many years, Fred Meyer faced an onslaught of new competition during 1988.

In July, Target Stores initiated its assault on Fred Meyer's core territory with the opening of nine stores in Washington and Oregon. By 1993, the Minneapolis-based upscale discounter expects to have some 35 stores open in the two states.

At the same time, Green Bay, Wis.-based ShopKo was infiltrating the Northwest as well. By year-end, ShopKo was operating seven stores in Idaho, seven in Utah, four in Washington and two in Montana. Plans for 1989 call for ShopKo to expand futher in the Northwest, adding one store in Idaho, three in Oregon, two in Utah and two in Washington. And, the chain continues to look in many of these areas for future growth.

Yet, despite this competitive pressure, Fred Meyer's 112 stores maintained their own growth last year. Looking at 1988 comparable store sales, Fred Meyer succeeded in generating a 7.9 percent gain. Sales increased 12.2 percent during the year to $2.07 billion, while operating income registered a 3.1 percent gain, to $54 million.

During the year, the chain devoted $101 million in capital spending to expand its market coverage and improve its existing stores. Two 164,000-square-foot multi-department stores were opened--in Washington and Oregon--seven major remodels were completed, and another three were started.

Fred Meyer also continued the development of its specialty chains, opening nine jewelry stores, one general merchandise store, one nutrition center and one apparel and shoe store during the year.

In an effort to stay ahead of the competition, Fred Meyer is increasing its expansion rate this year. Current plans call for the opening of four large multi-department stores. The chain also expects to finish nine remodels and start several more during the year.

Looking into the next decade, Fred Meyer plans to open five to seven large stores in 1990 and seven to 10 in 1991. At the same time the chain will continue remodeling efforts as well as the roll-out of its specialty stores.

This accelerated growth rate is just one of the recent changes at Fred Meyer since it went under the leadership of former K mart specialty division executive Fred Stevens last year.

At Fred Meyer's helm for just over one year, Stevens has already initiated a new strategic plan that the ceo stated "emphasizes employee participation in shaping the direction of the company to achieve the following vision: `Be the most creative, customer-respected, financially responsible, people-oriented retailer in America, and recognized as such.'"

Critical elements of the plan include employee workshops, improved employee orientation and increased job opportunity within the company ranks, Stevens said.

Stevens also continued Fred Meyer's ongoing process of refining its store layout and systems. In addition to improving store design and traffic flow with its new stores, Fred Meyer also expanded its scanning capabilities in 1988.

Twelve stores could process some 200,000 food, hard line and soft good sku's by the end of the year. Also by year-end, the chain expects to have food and non-food scanning at about 26 stores as well.